Voices of Alaska: A new path forward for Alaska

  • By Sen. Lesil McGuire
  • Tuesday, March 8, 2016 4:53pm
  • Opinion

Hey Alaska! Have you heard about a plan that would help stabilize government services, enhance our fiscal health, prevent a deficit driven recession and ensure that a dividend is still paid to every Alaskan?

By now almost everyone knows that the state is facing a very serious budget deficit. The legislature has reduced spending by more than $1 billion over the last two years. We are currently looking for additional reductions and greater efficiencies. There have been tax proposals introduced. However, even a combination of taxes and budget reductions will never close the deficit. We have been saved before by rising oil prices. We will not be saved this time.

The word “petrichor” means the smell of rain. Many Alaskan’s believe that the Permanent Fund was created as a rainy day fund—for when the revenue from our non-renewable resources diminished. The volume in the Trans-Alaska Pipeline is so low that oil would have to rebound to $110 per barrel to balance our budget. Does that mean it’s raining?

Einstein said, “You cannot solve a problem from the same consciousness that created it.”

We need to find a new path. We will not raid the permanent fund.

Last April, I introduced Senate Bill 114. If enacted, the bill would cut the deficit in half. It would guarantee every eligible Alaskan at least a $1,000 dividend. Because it would not close the deficit entirely, it would maintain downward pressure on the size and spending of state government.

Here’s how SB 114 works: it would recalibrate where the dividend comes from by tying it directly to the royalties that the state receives from mineral leases.

Responsible development means a bigger dividend.

Next, the bill would utilize part of the Earnings Reserve Account in a Percent of Market Value calculation to yield a sustainable revenue stream for essential state services.

This is not a raid on the Permanent Fund. In fact, SB 114 would help protect the Permanent Fund and the dividend program by restoring a measure of sustainability. This is not a way for government to increase its budget.

SB114 connects Alaskans directly to our share of the natural resources — which belong to each of us. It protects the dividend into the future, because without a structural change the dividend will likely end in a few short years. This bill is a way to ensure that essential services for Alaskans can be provided, such as: public safety, firefighters, roads, education, health and human services, the Alaska Marine Highway, Parks and recreation, and fish and game management.

When I crafted SB 114 I had these principles in mind: 1) it must retain a dividend, and without making the dividend dependent on the size of government. 2) It must reduce the volatility in the state budget. 3) It must clearly expose the cost of government, and ensure that Alaskans could begin an honest assessment of needs versus wants. 4) It must be enduring to allow the maximum use of our wealth over generations so that the benefits and burdens are shared. 5) It must be simple and easy to implement.

This is a new path forward.

Without a new approach, our Constitutional Budget Reserve account will be drained entirely in only two years. Once this happens, the single remaining source of funding for services will be the Earnings Reserve Account — the same one used to pay dividends. When that day comes, the state will have to make the difficult choice of paying out dividends or funding essential services for Alaskans.

Even if every new proposed tax was implemented immediately, the Earnings Reserve Account would still be in the financial cross hairs in just three years, placing the Permanent Fund dividend in jeopardy.

If we take a new path, such as SB 114, the state will dramatically reduce income volatility and preserve the dividend program for future generations. There are two other proposals to re-engineer the use of the Earnings Reserve. Only SB 114 guarantees a dividend of $1,000 or more.

The Dividend has helped make Alaska a great place to live for decades. I remember the day when I received my first dividend check, and what it meant to me. I have a deep personal connection to the program, but if we don’t act soon to protect it, the dividend may go the way of the dinosaur.

If you like the dividend program, Senate Bill 114 is your bill. If you’d like to see reduced volatility in state budgeting, Senate Bill 114 delivers. If you’d like to see continued downward pressure on the spending of state government, then Senate Bill 114 make sense.

I can smell the petrichor in our path. At this critical juncture in Alaska history, Senate Bill 114 is a new path forward.

Sen. Lesil McGuire, a Republican, represents South Anchorage in the Alaska Legislature.

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